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This question is about an Audit from EDD (Employment Development Dept.)

Los Angeles, CA |

I have beauty salon where some rent chairs and some stylist on commission. The renters creditcard money go to my bank account and I reimburse them weekly deducting their rents and merchant fee. I issue everyone 1009 at the end of year. After an audit and interviewing 4 stylists (all commissioned) EDD has decided that all stylists including renter are supposed to be my employees. This is for the year 2011 & 2012. I had a different Corporation at that time, which has since been dissolved. The EDD auditor has sent me provisional result imposing Liabilities/penalties. Auditor has done this in a jiffy & now has sent me a form DE 6028P to be filled up and signed. I am afraid if I send this form then even if the Corp is dissolved they can go after my personal assets. Correct? What will be way out

Attorney Answers 5


I once represented a barber shop and a stylist sued stating she was an employee. It was determined she was an employee even though she rented a chair due to the amount of control the owner had over the stylist. There is case law to support the position that stylists could be employees depending on the amount of control by the salon.

EDD is tough to negotiate with. I suggest you get yourself a good lawyer.

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If there is a way out it will be by way of a skilled attorney, who you should have gotten involved long ago. Your next step has to be finding an experienced attorney to discuss far more details with than you can on this public internet site. The attorney may be able to assist you with the EDD findings, but you are so far down the line with it that your options may be severely limited.

A great number of beauty salons have improperly characterized their employees as independent contractors. Someone years past created a model that has been followed for years, but that model was severely flawed, and the EDD and plaintiffs attorneys have been rooting out the mischaracterizations for years.

If nothing else, you need an attorney to assist you in correcting your method of doing business so as to avoid future findings.

Good luck to you.

This answer should not be construed to create any attorney-client relationship. Such a relationship can be formed only through the mutual execution of an attorney-client agreement. The answer given is based on the extremely limited facts provided and the proper course of action might change significantly with the introduction of other facts. All who read this answer should not rely on the answer to govern their conduct. Please seek the advice of competent counsel after disclosing all facts to that attorney. This answer is intended for California residents only. The answering party is only licensed to practice in the State of California.

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As my colleagues have said, you need an attorney, and you need one yesterday. This is what comes of trying to cut costs by not using one, and proceeding in a way that may or may not follow the law.

It costs money to run a business, which means there is overhead, and that includes good legal advice. You have to factor that in before opening up shop.

But we are where we are, and now you need to address this. I highly recommend Mr. Pedersen if he is willing to help you here. He is an excellent attorney, and can help guide you through this process.

Good luck with your legal issues.

Craig T. Byrnes

Disclaimer: Please be aware that I am not offering legal advice, nor forming an attorney-client relationship with you. I am not representing you, nor doing anything to protect your legal rights. If you believe that you have suffered a legal wrong, take action before any statute or limitations expires, or your right to do so may be lost forever. Good luck in your legal matter.

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My colleagues are correct and having handled several audits for companies that the EDD determined misclassified individuals, you should not waste time speaking with someone. Should you wish to appeal any assessment, you have a short time in which to do so.

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This site is to provide general legal information only. You need personalized legal advice from an attorney who has to review all of your documentation relating to your corporate entities and to also help determine whether to appeal the auditor's determination. And you need help quickly. The fines and penalties you may be subject to dictate not trying to save the cost of legal fees by getting free legal advice on the internet.

They say you get what you pay for, and this response is free, so take it for what it is worth. This is my opinion based on very limited information. My opinion should not be taken as legal advice. For true advice, we would require a confidential consultation where I would ask you questions and get your complete story. This is a public forum, so remember, nothing here is confidential. Nor am I your attorney. I do not know who you are and you have not hired me to provide any legal service. To do so would require us to meet and sign written retainer agreement. My responses are intended for general information only.

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